What Is Enhanced Due Diligence?
If a business or customer is at a greater risk of money laundering, terrorist financing, or other financial crimes, they must be subject to an extra level of due diligence. This is known as enhanced due diligence which goes beyond standard KYC/AML checks and gathers information outside the basic scope.
This includes identifying the people and entities behind your customers, including ultimate beneficial ownership (UBO) and identifying the source of wealth, money and business activities. It also probes underlying relationships and investigates unexplained transactions and activities that may indicate hidden risks.
It’s a key element in fighting the financing of terrorists and criminals. It is important to remember that EDD is a security measure which should be applied on a case-by-case basis. For example, an account opening in the UK with an unblemished passport, solid address history and no CCJs may only require CDD. However, another customer might require EDD because of an excessive amount of cash deposits or complicated transactions.
The best way to assess the need for EDD is to create a comprehensive risk assessment and screening framework. This should cover both your internal controls and external factors like negative media and political instability, sanctions and terrorism finance organized crime, fraud and money laundering.
Effective due diligence doesn’t rely on simply meeting regulatory requirements, or protecting brand image. It’s about making an impact in the fight against criminality in the world. You need an identity verification and EDD system that is quick reliable, accurate, and cost-effective to accomplish this.
